TMI Blog2013 (4) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee cannot be read in evidence against him. As decided in Kishinchand Chelaram vs. CIT (1980 (9) TMI 3 - SUPREME Court) that opportunity to controvert should be given to the assessee. Merely on the strength of statement of Rohit Panwala it cannot be held that purchases are bogus. - ITA No.3794/Ahd/2008 - - - Dated:- 16-12-2010 - Shri Mukul Kr. Shrawat, JM And D. C. Agrawal, AM,JJ. For the Appellant : Shri Mehul Shah, AR For the Respondent : Shri M. Mathivanan, DR ORDER Per D. C. Agrawal, Accountant Member. These are two cross appeals one by the Assessee and the other by the Revenue raising following grounds:- ITA No.3894/Ahd/2008 Asst. Year 2003-04 (Revenue s appeal) 2. The Revenue has raised the following ground :- (1) On the facts and in the circumstances of the case and in law, the ld. CIT(A)-III, Surat has erred in restricting the addition of Rs.83,78,699/- to Rs.20,94,675/-, made by the AO on the ground of bogus purchase of colour and chemicals. ITA No.3794/Ahd/2008 Asst. Year 2003-04 (Assessee s appeal) 3. The assessee raised the following ground:- (1) On the facts and in circumstances of the case as well as law on the subject, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business in colour and chemicals. After this statement Rohit Panwala apparently agreed to declare the income of these 12 concerns in his own name. Further on the basis of this statement received by the present AO from ACIT, Cir.4 notice was issued to the assessee intending to treat such purchases as bogus. In response to the show cause notice assessee furnished following reply:- 1. We have never made any bogus purchases from any party. We are neither knowing Shri Rohit Panwala nor the concerns you have stated in your letter from whom we have made purchases. 2. A person came to our factory and informed us that he us dealing in colour chemicals and shown some samples. By considering his rates and quality we have ordered for some quantity of colour chemicals which have duly been delivered at our factory along with respective bills. When we found that the goods supplied were OK we have made the payments by issuing account payee cheques favouring the respective party in normal course. 3. We are submitting herewith Xerox copies of the respective bills. 4. We are submitting herewith Xerox copies of cheques which were issued by us favouring the name of concern who have supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been made by the appellant as evidenced by the inward entry stamps on the bills. Now it is a common practice that the purchases, although made, are not from the established concerns but from agents of suppliers and small trade merchants. Obviously the purchase is to cut down in the cost of such purchases by getting the supplies at a lower rate than mentioned only in the bills and saving on various taxes like Octroi, sales tax, excise and certain other expenses. Since I am of the considered view that the said chemicals and colours were received and used by the appellant, the only question is what the benefit to the appellant was. As already mentioned the appellant would be making considerable savings due to lower prices and taxes as also freight etc. I am of the view that it is a fit case where the ratio of decision of Hon. ITAT Ahmedabad in the case of M/s Vijay Proteins (55 TTJ 76) is applicable. The Hon. Tribunal, in that case held that it could be fair and reasonable if 25% of such purchase price was disallowed to compensate for the discrepancies. In view of this decision, I hold that only 25% of the purchase price is to be disallowed which works out to Rs.20,94,675/-. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee were merely accommodation bills. In the above circumstances the disallowance made by the Revenue on the basis of surmises and conjectures without any positive material on record. Therefore, in our considered opinion, the disallowance made is unsustainable. Accordingly, we delete the addition made and allow the ground of appeal of the assessee. The above decision was following by the Tribunal in the following cases :- (1) Dada Silk Mills vs. ITO in ITA No.1896/Ahd/2007, order dt.11/9/2008. (2) Shalju Dyeing Printing Mills (P) Ltd. vs. ACIT in ITA No.1492/Ahd/2008, order dated 11.7.2008. (3) Sangitaben M. Patel vs. ITO in ITA No.4320/Ahd/2007, order dated 29.2.2008. (6) The ld. AR referred to the decision of Hon. Gujarat High Court in the case of CIT vs. M.K. Bros. (1987) 163 ITR 249 (Guj) wherein the AO had treated certain purchases made by the assessee from certain parties bogus on the basis of finding given by the Sales-tax authorities. Hon. Gujarat High Court held that evidence is not adequate to conclude that purchases are bogus when payments made by assessee by cheques. (7) The ld. AR then submitted that decision of the Tribunal in Akruti Dying Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this context rightly found that the said three parties have not been examined, and if examined, the statements have not been brought on record. The Tribunal has further found that payments were made by Account Payee Cheques and against receipt of goods. It is in this context that the Tribunal has recorded that there was no material on the basis of which it could be alleged that the three parties had admitted that the bills raised by the said three parties against the assessee were merely accommodation bills. 5. In light of the aforesaid findings of fact recorded by the Tribunal upon appreciation of evidence available on record it is not possible to accept the contention of the Appellant that the impugned order of Tribunal suffers from vice of perversity so as to give rise to a substantial question of law^ Admittedly, the originally proposed question does not arise from the impugned order of the Tribunal. (8) The ld. AR then submitted that the decision of the Tribunal in Vijay Proteins case would not be applicable as payment for purchase in Vijay Proteins were made in cash and parties were not traceable whereas in the present case payments were made by account payee cheques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the onus which has to be ensured that Rohit Panwala attends his office and assessee attends his office and he is offered for crossexamination by the assessee. The entire case of the Revenue revolves around the statement of Rohit Panwala. Since no cross examination of Rohit Panwala is allowed to the assessee then his statement recorded at the back of the assessee cannot be read in evidence against him. In this regard we refer to the decision of Hon. Supreme Court in the case of Kishinchand Chelaram vs. CIT (1980) 125 ITR 713 (SC) wherein it is held that opportunity to controvert should be given to the assessee. In this regard we refer to the following head notes from that decision :- It was true that proceedings under the income-tax law were not governed by the strict rules of evidence, and, therefore, it might be said that even without calling the manager of the bank in evidence to prove the letter dated February 18, 1955, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. Hon. Kerala High Court held as under :- Held,_ that (i) Whether, in view of the sworn statement of the lessee that he paid Rs.10 lakhs to the assessee (lessor), the Tribunal was right in holding that there was no material on record to show that the assessee had received Rs. 10 lakhs; (ii) Whether the Tribunal was right in not including the sum of Rs.10 lakhs in the hands of the assessee on the ground that the lessee was not put to cross examination by the assessee; (iii) Whether the Tribunal was right in not remitting the case to the assessing authority to complete the assessment afresh after giving the assessee an opportunity to cross examine the lessee; and (iv) Whether, as possession was admittedly handed over and in view of section 2(47)(v) of the Income-tax Act, 1961, the Tribunal was right in holding that there was no transfer under the impugned agreement and so levy of capital gains could not be sustained, were questions of law to be referred. 15. In ITO vs. Abhishek Ispat (P) Ltd. in ITA No.2709/Ahd/2008 Asst. Year 2005-06 pronounced on 30.9.2010 the statement of one Shri Prajapati against the assessee was directed to be ignored because he was not offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in Vijay Proteins case as under :- In this regard we refer to the decision of the Tribunal in ITA No.558/Ahd/2008 Asst. Year 2003-04 in the case of Shri Mohmed Akhtar AbdullahChakkiwala vs. ACIT and others, pronounced on 29.10.10 wherein the ratio of the decision of the Tribunal in Vijay Proteins Ltd. (supra) was distinguished as under :- Further the decision of the Tribunal in Vijay Proteins (supra) should have been considered in proper perspective. It should not be applied in a routine manner. Only in those cases where payments for purchases are made in cash and purchasers are not traceable then certain percentage of such purchases can be disallowed. However, where payments are made by account payee cheques then the decision in Vijay Proteins (supra) may not be applicable. Further in an another judgment of the Tribunal in ITA Nos.4097 4098/Ahd/2007 Asst. Year 2003-04 in the case of ACIT, Cir.6, Surat vs. M/s S. Nileshkumar Co., pronounced on 19.11.10 the decision in the case of Vijay Proteins Ltd. (supra) has been distinguished as under :- 9. We agree with the ld. AR that for invoking the decision of the Tribunal in Vijay Proteins Ltd. vs. ACIT (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money was withdrawn immediately and whether assessee was the beneficiary of such withdrawal; what are the goods assessee has purchased, whether they are required in the business of the assessee and if yes, to what extent and whether such purchases are superfluous in the sense that either they could not be required in the business or they are highly inflated. Further if the party is not traceable and ownership of bank account is highly suspicious and can be traced to the assessee then under such circumstances entire purchases needed to be disallowed. Purchases from one party in one instalment cannot be partly genuine or partly bogus. Even otherwise for holding that it could be partly genuine and partly bogus, lot of material is required to be placed on record so as to show the inflation of purchases and receipt of money back by the assessee in one form or the other. In any case it could have been a reasonable case to disallow entire purchases if party is not really traceable and bank account to which payment from the assessee has gone is directly or indirectly related to the assessee. Without there being any material to this effect and further AO having not rejected the books no ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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